Friday, January 26, 2007

Development Report Card: OR in Top Half, Barely

One of the perennial complaints from the right wing and business interests in Oregon is that the state is a poor crucible for economic development: stifled by a lackluster educational system, overdemanding taxation, and a too-dense thicket of operational regulations, Oregon companies or those based elsewhere but seeking a new location tend to view the state unfavorably as a good place to do business.

Is the perception true? Maybe so, if we mean that businesses really do believe these things. But is their perception an accurate reflection of reality? One of the problems in formulating an educated response is how one seeks to address the question. The nonprofit Corporation for Economic Development (CFED) offers some useful insight:

[E]conomies are fundamentally about people. Healthy economies offer greater opportunities for everyone. They should provide economic livelihoods, financial security, and an environment of opportunity for the people who live there. State and local economic development efforts should foster creativity, productivity, and inclusion.

In the 1980s, “economic development” was frequently viewed as primarily about companies. This outlook was further popularized by the many tools available that compared states’ “business friendliness.” While these ratings captured some important points, they often emphasized “low cost” instead of “high value.” The cheapest locations—those with low taxes and wages—got the best grades. These tools encouraged policies to weaken regulation, even if that regulation protected things like the environment and worker safety. An area’s good business rating could be damaged if workers were paid wages and provided benefits that were sufficient for their needs, even when public incentives were provided to their employers.

In 1987, the Development Report Card for the States offered a different way to assess state economies and a different way to think about economic development. It continues to do so in 2007. Measuring the standard of living and working in a state and how well the state is building foundations for future growth is just as important as how hospitable that state is to businesses.

That sounds like an analytical basis tailor-made to treat Oregon fairly, given our emphasis on promoting the common welfare even if it costs a little more in the short run. Putting their philosophy about "true" economic performance into action, CFED has released its 20th annual Development Report Card, which evaluates state economic performance in three broad categories: wage-earners, businesses, and the capacity for future development.

Development Capacity--A

The overall ranking of the state is 22nd. You can click on the categories that are hyperlinked above to see where the other states ranked, and you can also view Oregon's detailed profile here {pdf}, along with 5-year trends here {pdf}. To answer the question I posed above--is Oregon a lousy place to do business?--you can see why some people say yes. At the individual wage earner level, economic prospects are currently rather dim--but it certainly appears true that you get what you pay for, when you consider the returns in quality of life and the way we use our resources to maintain that quality. The state is #9 overall in the former, and #4 in the latter.

Since corporate "quality of life" doesn't have a real qualitative component, the cold hard numbers of economics weigh heavily on Oregon's 'D' grade in business performance. On business competitiveness (covering subjects like Business Closings, Manufacturing Investment, and Industrial Diversity), the state ranks a lowly 48th, 3rd from the bottom. Happily, on more forward-looking measures such as startups, IPOs and the technology sector, the state earns what amounts to a C+, two slots from a B ranking.

So where we stand now, things admittedly aren't all that great compared to the rest of the country. On the other hand, the present is already past, and if you're reading this you've survived it--and if things are managed properly, the future outlook is mighty rosy. The fervent talk from Governor Kulongoski and others about Oregon's potential to be a leader in the dominant economic sectors of the 21st Century appears to be right on; according to the report card we've got the resources, know-how and creativity to get it done. Despite the worries about a decaying infrastructure the state ranks 3rd in that area, and 5th in the category of "amenities and natural resources." If biotechnology, information technology and "green tech" are really the new economic engines that will drive development, Oregon clearly has what it takes to fulfill Kulongoski's vision of the future.

So the next time someone tells you Oregon's a rotten place to start a business or put food on your family, you can say, "Well, maybe right now things aren't so great. But hang in there--if we work together and take advantage of our strengths, better days are definitely ahead." And instead of being taken for a wishful pollyanna, now you can be confident you're right.